Utilising the Security of Payment Act in your business

Would you know what to do if a developer or builder stopped paying your invoices?

Knowing how to issue or respond to a payment claim under the Building and Construction Industry Security of Payment Act 2002 (Vic) can help to secure prompt payment for contractors and avoid lengthy, drawn out disputes.

Security of payment legislation exists to keep money “flowing” to building contractors by imposing strict timelines between claiming for work and getting paid. Once a valid claim for completed building work is issued the recipient must either pay or dispute the claim and if a claim is not disputed or responded to properly, the Act makes it easy for a contractor to sue for the debt. For that reason it is vitally important that each payment claim and each payment dispute (called a payment schedule) contains the necessary information.

Important requirements of the legislation include:

Notice of a payment claim

A payment claim and an invoice can look similar. There are important differences, however. One example is that the document must bear the words, “This is a payment claim pursuant to the Building and Constructions Industries Security of Payment Act 2002 (Vic)”.

Outline the work

Every payment claim should also include enough information to allow the recipient to understand the work for which payment is claimed. While this may vary job-to-job and can turn on the relationship between the parties, at the minimum the claim should include an itemised description of the work or materials supplied and a breakdown of any rates or costs being claimed.

Timing

Upon receipt of a payment claim, the recipient must pay or respond to a payment claim within 10 business days. If the recipient fails to respond, a claimant can obtain an expedited judgment for the debt without set-off or defence.

Disputed Claims

Disputes may arise over part or the entirety of a claim. A recipient can dispute a payment claim by issuing a payment schedule to the claimant within 10 business days of receipt of the claim. That means there is very little time for the recipient to validly dispute a claim.

Adjudication

If a claim is disputed in time, the Act provides a time-sensitive adjudication process for claimants, where an adjudication has to be determined within 10 business days of an adjudication application being made, or a response to the adjudication being given. This is to promote the principals of the Act to keep money flowing to contractors.

 

If you need to issue a payment claim, or have outstanding payment claims which have not been validly disputed, please contact Zlatko Reyer or Peter Lettieri for more information.